I’m shopping around and looking to purchase my first positive cashflow property, and I was wondering if are there any tax advantages of buying a property under a business name, compared to your personal name?

Basically all advantages and disadvantages are like jigsaw pieces. You pick and choose the ones relevant to your strategies and hopefully all fit together. Hence you need an accountant / lawyer who understands business / property investing.

Below is the lists of the benefits of both sides as far as my knowledge, and others will chip in. Then you decide for yourself, which ones are the best for you.

The benefits of doing it under personal name
– Tax minimisation through negative gearing, if you are on high tax bracket.
– Land tax threshold $432k (and $2.6mil) of the value of all IPs under your name.
– If you want the cash, you need to sell and pay Capital Gain tax.

The benefits of doing it under company structure (Ltd)
– Income tax rate is 20%, lower than personal income tax rate
– Land tax threshold is nil, meaning you always pay land tax on the full value of the IPs
– Losses can be carried forward to the next tax year (when the income is < expenses, company loss can be carried forward to the next financial year).
– If you want the cash, you can sell the shares in the company, rather than the properties themselves. In Qld there is no stamp duty for transferring shares. You don’t even have to sell the shares you currently have – you can create new shares to sell. Meaning you can get friends or families to inject money into your company in exchange of shares and future earnings.
– As the director of the company, you can pay yourself a salary – you can calculate how much your salary is such that your strategy is met either tax minimisation or cash flow management. Whilst in private name setting, you cannot employ yourself.
– As the share holder you can arrange to be paid dividend, which carry tax credit for you. Because the company already paid the 20% tax, that tax can be compensated against your own personal tax.
– You can also choose whether you want your money as shares or loans to the company. The impact is, you either get dividend or interest payments.
– If the company uses your PPOR for office, then a fraction of all expenses, including mortgage interest, can also become expenses to the company. Again, you can arrange this to suit your strategy, provided that you are reasonable. For example, you cannot just say 50% of car expenses, mortgage interest, electricity, etc. unless you can prove beyond reasonable doubt that the company indeed uses 50% of all these.
– If for some reasons the company is sued, worst case scenario is you only lose your shares. Theoretically, the court cannot go beyond the company assets to get you.
– It is also easier to transfer shares to your kids, compared to IPs. Obviously you can transfer the IPs to them, but you can also sell / give the shares or re-arrange the books and create shares for them. You can also get them to be the director and pay them salary. The salary can be money or shares.

The above is for Ltd structure. There are other structures such as trust and partnership / Joint Ventures.

See, it’s all about your strategies. You pick and choose the correct jigsaw pieces to fit your strategies. And companies get more jigsaw pieces to choose from.

Anybody else has inputs? Always happy to be proven wrong.

Just my to cents

Cattleya
Here to learn the ropes of property investing and hopefully help others along the way.

Cattleya

Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.

The first thing you have to understand is a business is not a separate legal entity or tax entity so registering a name will make no difference.

Cattleya – many errors
Company tax is 30%
Land tax is state based. A company owning land in NSW will get a threshold of $432k if not acting as trustee.
Not sure what you mean about if you want the cash.
Directors liable for company debts in many cases. Worse case is director loses personal assets.
Your comments about claiming things are potentially dangerous.

Sounds like I need to get a good accountant that can look into these things for me. Do either of you or anyone else out there know of a good accountant that is into the positive cashflow mindset in Melbourne? Also I’m after a good conveyancer/solicitor if you could recommend any that would be an great help.

I have nobody to refer as I am also looking for a good accountant / lawyer. ;) It’s probably a tad more difficult for me to find somebody as I know a bit more about their stuff and therefore know what I am looking for.

However, I think it is best to keep an eye on your properties yourself, do not rely too much on the professionals. I am not saying they are bad, I am saying though, it is natural for everybody to look after Number One. Naturally, nobody looks after your interests better than yourself.

And you get what you pay for… peanuts are only for monkeys with little, if any, reputation to up hold. If you pay a lot and still get monkeys, at least you can sue them / report them to their professional associations or at least get them on the media – if they are big enough the local newspapers are all ears.

Just my 2 cents

Cattleya
Here to learn the ropes of property investing and hopefully help others along the way.

Cattleya

Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.

Oops, I hope my comments have not ruffled some feathers. My sincerest apology if I have..

Can I please clarify my position:
1. This website is akin to bbq picnic chats among friends where more often than not the conversations are invariably about crickets, footie and properties where we all exchange ideas and knowledge.

2. I’m not looking to sell my services, merely sharing my understanding and ideas. Like in a bbq picnic setting, the members will follow up the bits of information through ATO / ASIC websites or other official websites or with the professionals they eventually engage. Even if the information is correct and coming from a professional, it is usually followed up as well.

3. I do not need to get my details right all the time. When the time comes to execute my ideas, with the help of ATO/ ASIC/ other professional bodies and the professionals I engage, I will get it right.

4. Even Steve, in his books, provides examples that might be considered dangerous. But that’s not the point, isn’t it. It is about knowing our options, our financial strengths, risk appetite and choosing the best investment strategy. No Pain No Gain.

5. I find some (not all, mind you) professionals are very tight in sharing their knowledge – which is understandable given that this is what they sell. I explain as much as I can because my intention is knowledge sharing. Unfortunately what I share for free might well be in the area they wish to protect. Some simply say “It is very dangerous!”

> Danger to me is an opportunity to somebody else. Steve has a ‘trick’ to use other people’s money to top up when his company is short of capital. So ‘danger’ to the company is an ‘opportunity’ to others to link up with Steve – who wouldn’t want to link up with him. So whether it is a danger or an opportunity depends on, again, my financial strengths, knowledge of my options and my risk appetite.
> The alternatives of not knowing my options are investing with limited knowledge or blindly follow the ‘advice’ of the professionals or not investing at all. Each to their own, but I wouldn’t jump to any investment without investigating my options.

Summarising the long winded essay above:

These conversations are akin to friendly chats over a bbq; the important thing is to share ideas – everything is mulled over and verified when the time comes.
These ideas are important in our learning process so when the time comes we are well informed of the risks / options and can develop our strategies accordingly – much better strategies.
It is a legal requirement for banks / insurance / financial companies to tell us our options even if it is just opening a simple bank account. Property investing is much more expensive and much less regulated. Why wouldn’t we want to know all our options – even if we need to confirm them, it helps to know what to ask in the first place.

Anyway, please invest safely. It is too much money to not pay attention to.

Cattleya
Here to learn the ropes of property investing and hopefully help others along the way – happy to discuss anything. Not trying to sell anything, though also not trying to prevent professionals selling their services.

Cattleya

Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.

Cattleya
Here to learn the ropes of property investing and hopefully help others along the way – happy to discuss anything. Not trying to sell anything, though also not trying to prevent professionals selling their services.

Cattleya

Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.

Best bet is to get professional advice from a good accountant/solicitor regarding your individual circumstances. I’m not an accountant/solicitor – but IMO, rarely is it a good idea to purchase under a company structure. However – seek pro advice and see what they say.

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